Network Expansion Policy Of Exchange Companies

FE Circular No. 01 of 2013June 03, 2013

Please refer to F.E. Circular No. 9 of 2002 and other instructions issued from time to time regarding the expansion of Exchange Companies\\' network. With a view to simplify the procedure of network expansion of Exchange Companies and to consolidate existing instructions on network expansion, the following policy is hereby circulated for meticulous compliance:

1. Annual Network Expansion Plan (ANEP)

a) An Exchange Company (EC) desirous of opening new branches, franchises, payment booths and currency exchange booths shall submit an Annual Network Expansion Plan (ANEP) duly approved by its Board of Directors by 30th September of each year for the next calendar year (Jan-Dec) on prescribed format (Annexure-I). In-Principle approval to ANEP for the next calendar year shall be granted by the Exchange Policy Department keeping in view the compliance status and inspection rating of the exchange company.

b) In Principle Approval granted under ANEP shall be valid only for one year.

d) In case of non-compliant or marginally compliant exchange company, approval for network expansion may not be considered. However, EPD will hold discussion with the management of the company on specific issues.

e) Before commencement of operations of each outlet, as approved in ANEP, Exchange Companies shall be required to apply for formal approval/license for each outlet. Application for the same must be accompanied by documents as mentioned at Annexure-II.

f) In case the planned expansion is for other than company-owned outlet, before forwarding the application to the State Bank, it will be responsibility of the exchange company to scrutinize the applicant(s) in all respect including his/their present & past occupation/profession and ensure that the applicant(s) has/have never been involved in any unlawful activity and has/have not been failed to honor his/their liabilities towards banks/tax authorities/government agencies etc. The company will further ensure that the applicant(s) is/are fully aware about rules & regulations specified by SBP and is/are committed to follow them in letter & spirit.

g) Exchange Companies having capital of Rs. 200 million or above will be eligible for their network expansion. New companies having capital of less than Rs. 200 million will initially be allowed a maximum network of 20 only. Page 1 of 3.

2. Capital Adequacy for Network Expansiona) In addition to the criteria defined at 1 above, the following criteria related to capital adequacy shall be observed for network expansion:

Branch

Rs. 5,000,000/- per branch

Franchise

Rs. 3,000,000/- per franchise

Payment Booth/Currency Exchange Booth

Rs. 2,000,000/- per PB/CEB

1 ) It may, however, be noted that the above criteria is only for calculation of capital adequacy of the company in relation to their entire network. Exchange Companies shall be free to assign any amount of capital to any of their outlets.

2 ) In case of franchises and third party payment booths, the business name must be indicated in the ANEP which, if approved, should be prominently displayed outside the place of business alongwith exchange company’s name.

3 ) License/permission of franchise/third party PB shall be non-transferable other than to the company itself.

3. Temporary Currency Exchange Booths at Haji CampsIn order to facilitate Hajj Pilgrims, Exchange Companies may establish their own Currency Exchange Booths (CEB) at Haji Camps during Hajj Season, subject to the following terms and conditions:

1 ) For establishing the said booths at Haji Camps, an NOC will have to be obtained by the exchange company from Ministry of Religious Affairs prior to approaching SBP for approval.

2 ) The booths will be setup temporarily during Hajj Season only.

3 ) The booth will be authorized to deal only in sale of Saudi Riyals to Hujjaj during Hajj Season for which related details/documents and record of transactions will be maintained by the exchange company and will be produced for SBP inspection as and when required.

4 ) No business other than specified above will be undertaken at the said booths.

5 ) Transactions carried out through such booths will become an integral part of the overall transaction record of the exchange company and will be reported to SBP in related returns accordingly.

4. Relocation of OutletExchange companies may relocate any of their outlets during the year within city/town under intimation to the State Bank of Pakistan. However, before commencement of operations at the new location, prior approval of the State Bank shall be required for which the company shall submit the related documents as mentioned in Annexure-II. Further, the company shall surrender original license/permission letter for issuance of revised license/permission. Inter-city relocation is not permissible. In this case, the company will close the operations of its outlet from one city and apply for establishment of fresh outlet in another city.

5. ClosureExchange companies shall be free to close any of their existing outlets without obtaining prior permission of the State Bank. Information regarding closure of the outlet should be published in a leading newspaper at the time of closure and original license/permission letter of the outlet must be surrendered to SBP within 15 days from the date of closure.

6. Processing FeesA processing fee of Rs. 25,000/- will be charged for each application for the establishment/relocation of each outlet. Exchange Companies shall submit the above fees related to them and their franchises/third party PBs through DD/PO drawn in favor of the State Bank of Pakistan.

7.It will be the discretion of the SBP to grant or refuse, fully or partially, ‘In-Principle’ or ‘Formal Approval’ without assigning any reason.

8.Exchange companies who do not fulfill the paid-up capital requirement in relation to their existing network must fulfill the capital requirement by 31st December 2014.

9.All other instructions on the subject shall remain unchanged. Please bring the above contents to the notice of all your constituents.